Japanese OEMs tops at involving suppliers early in development process, says 2014 study

19-May-2014 04:02 EDT

Over the years, the WRI study has shown that automakers with 'Good-Very Good' working relations reap substantial benefits, such as suppliers being more willing to invest in new technology to meet future OEM needs as well as suppliers being more willing to share new technology with an OEM. The graph shows 'Very Poor-Poor'; 'Adequate'; and 'Good-Very Good' rankings for the Japanese 3 and the traditional U.S. domestic 3.

Toyota and Honda are better than the traditional domestic Big 3 at involving suppliers early in the product development process, according to results of the 2014 North American Automotive-Tier 1 Supplier Working Relations Index (WRI) Study compiled by Planning Perspectives Inc. (PPI) of Birmingham, MI.

“From an engineering standpoint, Toyota’s and Honda’s continuing efforts to get suppliers involved earlier in product development, and also the effective use of suppliers throughout the Toyota product development process” rings in as the best news from the 14th annual automotive industry study, PPI President and CEO Dr. John W. Henke Jr told Automotive Engineering.

In the May 12-released study, Toyota, Honda, and Nissan were one, two, and three, respectively, in overall rankings with Honda being the ‘most preferred’ customer as well as the top-ranked OEM as it relates to involving suppliers early in the product development process. Toyota and Ford had the next highest ranking for getting suppliers into the product development mix early.

The 2014 study focused on Chrysler, Ford, General Motors, Honda, Nissan, and Toyota. These six automakers comprise 86% of light vehicle production in the U.S. This year’s findings were based on responses from 411 supplier personnel from 362 Tier One suppliers representing 56% of the OEMs’ annual buy.

Although BMW, Mercedes-Benz, and Volkswagen have been addressed in the annual study since 2010, the German 3 with manufacturing operations in North America are reported separately from the other six OEMs.

According to Henke, the Japanese automakers, especially Toyota and Honda, historically have had a commanding lead in supplier relations. But the 2008 recession, the 2011 earthquake off Japan’s coast, and additional purchasing personnel at Toyota and Honda led to a rankings plummet.

Under new purchasing leadership, the domestic Big 3 significantly improved their supplier rankings. But the latest ranking trends suggest “that the Japanese automakers have figured out their problems, corrected them, and are back on track, while the U.S. automakers appear to be stagnant,” noted Henke, who is also a professor of marketing at Oakland University in Rochester, MI.

The rankings put Toyota at the top for having the fewest engineering changes. “Toyota is doing the best job and is maintaining that level,” Henke said.

Toyota is also the top-ranked for protecting suppliers’ intellectual property and proprietary information. “There is clearly one very definite reason: Toyota, like Honda, has a set of suppliers that hasn’t changed very much over the past 10 years. It is rare that they (Toyota and Honda) de-source a supplier.

“The implication being that a supplier is working with Toyota because at the time of selection that supplier was determined to be the best Toyota needed and would be able to service them in the future. Because there is relatively little turnover, there’s much more certainty and more trust,” Henke explained.

As was the case in 2013, Toyota was ranked tops for protecting intellectual property and proprietary information, with Honda coming in second. “And they both improved this year again, further distancing themselves in treatment of confidential information from the U.S. domestics. Nissan made strong gains in this area,” Henke noted. “Toyota and Honda both have a fixed supply base. They both have approximately 400 production suppliers and rarely turn them over. That means they have no reason not to keep confidences.”

As it relates to the various WRI study’s scoring metrics, Nissan was the lone automaker to improve in all areas.

“Suppliers are being given significantly more flexibility in meeting Nissan’s quality and piece-price objectives, said Henke. “Nissan has improved in reducing late engineering changes over all others except Toyota.”

As for the most-disappointing news from this year’s study, Henke had hoped to see more improvement from the traditional Detroit 3.

“Nissan, Honda, and Toyota are improving, distancing themselves from Ford, GM, and Chrysler. This certainly will impact supplier engineering as to where suppliers will allocate engineering resources when things get tight—who gets the ‘A team;’ who gets the newest, best technology; who gets the best support from the supplier; etc.,” noted Henke.

If the Japanese 3, the Detroit 3, the German 3 were combined on a consolidated WRI 2014 graph, Toyota would rank the highest of the nine automakers and Volkswagen the lowest.